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  • Writer's pictureThe San Juan Daily Star

Judge stays lawsuits against Law 60 beneficiary facing federal criminal charges


By The Star Staff


A judge in the U.S. District Court for the Southern District of New York has stayed lawsuits filed by the Securities and Exchange Commission and by the Commodity Futures Trading Commission (CFTC) against Avraham Eisenberg, who is facing criminal charges for orchestrating and carrying out a scheme to fraudulently obtain some $110 million in cryptocurrency.


Judge Laura Tiangco Schofield granted requests from the U.S. Department of Justice and the U.S. Attorney for the Southern District of New York to stay the civil cases because they have the potential to affect the criminal case against Eisenberg, a beneficiary of local Act 60 tax incentives (formerly Act 20 and 22) who was arrested in December in Puerto Rico.


“The stay sought by the Government will conserve this Court’s time and resources, because the outcome of the criminal case is likely to have a significant impact on what issues are ultimately in dispute in the civil cases,” the judge said in a ruling March 13. “Moreover, allowing discovery in the civil cases to proceed without restriction risks giving the defendant, Avraham Eisenberg, the tools to improperly obtain impeachment material regarding the Government’s witnesses, circumvent the criminal discovery rules, and improperly tailor his defense in the criminal case.”


The civil suits were filed in January.


Eisenberg, who described himself as a digital art dealer, was charged for stealing cryptocurrency from a Solana blockchain-based decentralized cryptocurrency exchange called Mango Markets and its investors. Mango Markets allowed investors to buy and sell perpetual futures contracts, including perpetuals based on the relative value of Mango Markets’ native crypto token, MNGO, and a crypto stablecoin called USDC.


The indictment says that on or about Oct. 11, 2022 , Eisenberg deceptively used two accounts on Mango Markets that did not appear to the public to both be controlled by him, but were in fact controlled by him, to sell himself, from himself, a large number of MNGO Perpetuals. Eisenberg then made a series of large purchases of MNGO using USDC with the objective of artificially increasing the price of MNGO relative to USDC and, in turn, the price of MNGO Perpetuals on Mango Markets.


The purchase achieved the desired effect, causing the price of MNGO Perpetuals on Mango Markets to rise approximately 1,300%. As the price of MNGO Perpetuals on Mango Markets rose due to the manipulative purchasing by Eisenberg, the apparent value of the MNGO Perpetuals that Eisenberg had purchased from himself also rose.


“Because Mango Markets allows investors to borrow and withdraw cryptocurrency based on the value of their assets on the platform, the artificial increase in the value of the MNGO Perpetuals Eisenberg had purchased from himself allowed him to borrow, and then withdraw, approximately $110 million worth of various cryptocurrencies from Mango Markets, which came from deposits of other investors in the Mango Markets exchange,” according to the indictment.


The defendant also faces a civil lawsuit filed by Mango Markets.


According to the Daily HODL, Eisenberg used a technique used by hackers to artificially inflate “the trading volume of a low-liquidity token on a DeFi protocol, which is designed to spike the token’s price.”


“Chainalysis notes that hackers will often use flash loans to secure the initial capital needed to inflate the token’s trading volume, then trade the designated token for a more stable crypto asset after pumping up the price,” the publication notes.


Daily HODL also noted that there were 41 separate attacks in 2022, and pointed to last October’s $100 million exploit of Mango Markets, which was launched in 2021, as a prime example of what that kind of hack looks like.

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